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Clarifying Transfer Pricing Requirements in the UAE in 2025


As the UAE continues to modernize its tax framework, transfer pricing (TP) has become a critical area of focus for businesses operating in the region. With the implementation of Corporate Tax and adherence to international tax principles, the UAE is aligning itself with global standards, particularly the OECD Transfer Pricing Guidelines.


This post sheds light on the UAE’s transfer pricing requirements as of 2025, providing businesses with clarity on compliance, documentation, and the implications of non-compliance.


What Is Transfer Pricing?


Transfer pricing refers to the pricing of goods, services, and intangible assets transferred between related entities within a multinational group. It ensures that these transactions are conducted at an arm’s length price, meaning they reflect the terms that would apply if the parties were unrelated.


The aim of transfer pricing regulations is to prevent profit shifting and ensure fair taxation by allocating profits to the jurisdictions where economic activities and value creation occur.


Transfer Pricing in the UAE: Key Developments


The UAE has introduced transfer pricing regulations as part of its Corporate Tax framework, which was implemented to comply with international tax standards, including the Base Erosion and Profit Shifting (BEPS) Action Plan by the OECD. The regulations apply to businesses conducting related-party transactions and focus on ensuring transparency and fairness in cross-border dealings.


Some key features of the UAE’s transfer pricing requirements include:


1. Arm’s Length Principle


The cornerstone of the UAE’s transfer pricing rules is the arm’s length principle. This means that related-party transactions must be priced in line with comparable transactions between independent parties in similar circumstances.


2. Documentation Requirements


Businesses in the UAE are required to maintain comprehensive transfer pricing documentation, which typically includes:

• Master File: A document providing an overview of the multinational group’s global business operations, organizational structure, and overall transfer pricing policies.

• Local File: A detailed report on the specific entity’s related-party transactions, including supporting evidence to demonstrate compliance with the arm’s length principle.


3. Disclosure Forms


Entities must submit transfer pricing disclosure forms as part of their annual corporate tax returns. These forms provide a summary of related-party transactions and identify whether the taxpayer has prepared the required documentation.


4. Thresholds for Applicability


While all businesses must disclose related-party transactions, specific documentation requirements may apply only if certain thresholds are met. These thresholds are defined by the Federal Tax Authority (FTA) and are updated periodically.


5. Benchmarking Analysis


A key element of transfer pricing compliance is benchmarking analysis, which involves comparing related-party transactions to similar transactions between independent parties to establish arm’s length pricing.


Challenges for Businesses


The introduction of transfer pricing regulations in the UAE presents several challenges for businesses, including:

• Data Collection and Analysis: Gathering and analyzing data to justify pricing policies can be complex and time-consuming.

• Alignment with International Standards: Businesses with global operations must ensure consistency with both UAE regulations and international guidelines.

• Audit Preparedness: The FTA is expected to conduct audits to ensure compliance, and businesses must be prepared to defend their transfer pricing positions.


Penalties for Non-Compliance


Non-compliance with transfer pricing requirements can result in significant penalties, including:

• Monetary fines for failing to maintain or submit required documentation.

• Adjustments to taxable income, which may increase the tax liability of the entity.

• Reputational damage and increased scrutiny from tax authorities.


Businesses are encouraged to stay up to date with FTA regulations and ensure full compliance to avoid these consequences.


Best Practices for Compliance in 2025


To navigate the complexities of transfer pricing in the UAE, businesses should adopt the following best practices:

1. Develop Robust Policies: Establish clear transfer pricing policies aligned with the arm’s length principle.

2. Engage in Benchmarking: Use reliable external data to compare related-party transactions with independent transactions.

3. Maintain Accurate Documentation: Prepare and retain detailed Master Files and Local Files to support transfer pricing positions.

4. Conduct Regular Reviews: Periodically review and update transfer pricing policies to reflect changes in business operations or regulations.

5. Seek Professional Guidance: Work with tax advisors or consultants experienced in UAE transfer pricing to ensure compliance and reduce risk.


So, to sum up…


Transfer pricing is a vital component of the UAE’s evolving tax framework. By adhering to the arm’s length principle and maintaining proper documentation, businesses can minimize tax risks, enhance transparency, and demonstrate compliance with international standards.


As the UAE continues to align with global tax practices, staying proactive and informed is essential. With proper planning and professional support, businesses can navigate transfer pricing requirements effectively and ensure seamless compliance in 2025 and beyond.


If your business needs assistance in understanding or implementing transfer pricing policies, consult with us!


DISCLAMER: The above text should not be treated as the tax advise you may rely on. Please consult with your tax advisor to address your own facts and circumstances.

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